State Rundown 10/21: States Preparing Ingredients for 2021 Fiscal Debates

State lawmakers around the nation are already looking well past the upcoming election to the legislative debates they’ll be cooking up in 2021. In Iowa and Nebraska, anti-tax groups are thawing out regressive tax shift ideas they had put on ice earlier in the pandemic. In Delaware, a lawsuit and recent settlement  have put educational and property tax inequities on the menu for the upcoming session. Meanwhile New Jersey and New York are both looking to add stock to their revenue mixes with progressive taxes on stock trades.

Major State Tax Proposals and Developments

• Educational equity improvements will be on the agenda in DELAWARE this coming session after a lawsuit on the matter was settled out of court, requiring Gov. John Carney and lawmakers to attempt to help disadvantaged students and communities through targeted funding improvements. – DYLAN GRUNDMAN O’NEILL
• VIRGINIA lawmakers passed a new $141 billion state budget after a historically long special session. The budget includes investments in behavioral health, criminal justice reforms, and bonuses for state employees and law enforcement, among others. The budget also uses a new tax on electronic skill games to replace lost sales tax revenue for education initiatives. – KAMOLIKA DAS

State Roundup

• CALIFORNIA recently took a step forward for racial and economic justice by repealing some of the many county-level fees that local governments have increasingly come to rely on but fall disproportionately on low-income families, particularly those in communities of color. Voters can take another step in the right direction by approving Proposition 15, as we write in the Just Taxes Blog here.
• IOWA Gov. Kim Reynolds plans to bring back her effort to shift hundreds of millions of taxes off of high-income households and onto lower- and middle-income families by increasing the state sales tax and syphoning some of the money away from voter-approved water quality improvements to pay for income tax cuts instead.
• LOUISIANA lawmakers passed a package of measures that would freeze current unemployment benefits for jobless workers as well as current tax rates for businesses that pay into the unemployment trust fund. Without intervention, the drop in the unemployment trust fund balance would have automatically triggered business tax hikes and a decline in benefits. Lawmakers have yet to settle on a long-term fix for refilling the fund. In spite of the state’s budget issues, lawmakers approved a tax break for the oil and gas industry, introduced a tax break for parents who hired tutors for virtual learning, and added a sales tax holiday in November.
• MASSACHUSETTS Gov. Baker submitted a new budget proposal for the current fiscal year. The budget, which avoids any broad-based tax increases, relies in part on federal relief funds and draws $1.35 billion from the state’s rainy-day fund. The state is projecting a $3.6 billion revenue shortfall.
• An effort is underway to slash taxes on high-income households in NEBRASKA, shift the remaining taxes onto low- and middle-income families (who are already the highest-taxed groups in the state), and cut funding for shared priorities like education and health care. Proponents say this will make the state more competitive and grow the economy, claims which research and history soundly debunk, as experts in the state are already pointing out.
• NEVADA’s revenue forecasters met last week, expressing concern that their official forecast to come in December could be full of bad news if Congress does not step in with relief such as the direct payments and unemployment aid that have been buoying consumer spending the last several months.
• NEW HAMPSHIRE Gov. Chris Sununu announced that the state filed suit in the US Supreme Court to challenge a Massachusetts Department of Revenue regulation that will require New Hampshire residents who had been commuting to MASSACHUSETTS to pay income taxes.
• Fresh off of achieving major tax fairness victories by raising needed funds through a millionaires tax and helping low- and middle-income workers through an Earned Income Tax Credit (EITC) expansion, NEW JERSEY leaders are looking closely at further tax adequacy and equity improvements via a small (.01 percent) temporary (two-year) tax on high-speed stock trades.
• NEW YORK lawmakers continue to consider reviving a tax on stock trading that already exists but is currently cancelled out by an automatic rebate. The bill to recommence collecting the tax could raise billions for state funding needs such as higher education, where leaders fear dire consequences of anticipated budget cuts, and opioid addiction treatment, which advocates say is being underfunded at a crucial time.
• SOUTH CAROLINA Gov. Henry McMaster announced that $66 million of federal COVID relief funds will be used to launch two new grants, the Minority & Small Business Relief Grant and the Nonprofit Relief Grant.
• WISCONSIN is refusing to give Foxconn Technology Group billions in state tax credits if the company does not agree on terms of a new contract. The state said that the company has not met its investment and activity targets under the first contract signed in 2017.

What We’re Reading

• It’s raining. States across the country are taking steps to tap their financial reserves in response to the current recession. Pew Charitable Trusts provides information on states’ balances and their plans for withdrawals. Route Fifty summarizes the Pew research.
• Route Fifty notes that support staff like drivers, aides, and custodians may be seeing even worse job losses in the pandemic than teachers.
• Governing columnist Jabari Simama writes about the underappreciated value of community colleges to American communities, economics, and racial equity.
• USA Today and the Center on Budget and Policy Priorities each weigh in on the importance of federal fiscal relief to state efforts to avoid further job losses and rebuild their economies.
• A new poll by the Georgia Budget & Policy Institute found that 68.7% of Georgians support adopting a formal review process to assess the return-on-investment from corporate tax exemptions.
• In a recently released report Policy Matters Ohio identifies revenue raising proposals and reforms to clean up and rebalance Ohio’s upside-down tax code.
• Nebraska’s OpenSky Policy Institute is wrapping up its webinar series on policies to advance racial and ethnic equality on October 28^th. Recaps and video recordings from the first and second installments in the series are available as well.

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